Live through enough bubbles, though, and you do eventually learn something of value. For example, I’ve learned that although getting out too early hurts, it hurts less than getting out too late. More important, I’ve learned that most of the common wisdom about financial bubbles is wrong.

Wall Street benefits enormously from the US tax code and monetary inflation. Among other things, the tax code diverts billions in savings to fund managers who otherwise would have to work that much harder to attract investment dollars. Thus, there is a big atmosphere of moral hazard and OPM (Other People’s Money). Long term though, the Street generally gets it right: home prices don’t go up forever; Enron was just a middleman; (fill in the blank).com doesn’t actually make anything; etc., etc.